The major domestic equity indexes rallied on Wednesday as Wall Street eyed strong economic data and trade war fears were placed on the back burner, while the Nasdaq registered its third straight record closing high.

White House economic adviser Larry Kudlow said late in the trading day that Trump will meet French President Emmanuel Macron and Canadian Prime Minister Justin Trudeau during a G7 summit this week.

Although he indicated that Trump is not backing down from the tough line he has taken on trade, the comments appeared to calm investors. At the same time, the government is weighing an offer by China to import an extra $70 billion of American goods over a year as Beijing tries to defuse a potential trade war.

Trump last week pushed on with imposing tariffs – 25 percent on steel and 10 percent on aluminum – on Canada, the EU and Mexico, with Mexico retaliating by putting tariffs on American products such as steel, pork and bourbon.

The benchmark 10-year U.S. Treasury yield rose to a near two-week high after data indicated that the trade deficit unexpectedly fell to a seven-month low in April, supporting the view of an acceleration of domestic economic growth in the second quarter.

The S&P financial sector index rose 1.8 percent and was the S&P’s largest aiding sector as bank shares rose along with Treasury yields. Higher interest rates tend to help bank profits. The bank index rose 2.3 percent as the sector was also aided by an increase in mortgage applications for the first time in seven weeks.

Nasdaq’s largest improvement was from Comcast, whose shares rose 3.8 percent. Tesla rose 9.7 percent after CEO Elon Musk reassured shareholders that building 5,000 of its mass-market Model 3 cars per week by the end of June was “quite likely”.

Although the technology sector reversed earlier losses to end the session with a 0.5 percent gain, it lagged the broader S&P as well as sectors such as financials.

The utilities index was the only one of the S&P’s 11 major sectors in the red, with a 2.1 percent decline.

Facebook was the biggest drag on the tech sector with a 0.8 percent drop after the social networking company confirmed it collaborated with at least four Chinese companies on sharing user data.

Approximately 6.88 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.64 billion share average for the past 20 trading sessions.

Trade Deficit Falls

The U.S. trade deficit fell to a seven-month low in April as exports rose to a record high, lifted by an increase in shipments of industrial materials and soybeans.

The Commerce Department reported Wednesday morning that our trade deficit fell 2.1 percent to $46.2 billion, the smallest number for that statistic since September. Data for March was revised to show the trade deficit falling to $47.2 billion, instead of the previously reported $49.0 billion. The government also revised trade data going back to 2010.

When adjusted for inflation, the trade gap narrowed to $77.5 billion from $78.2 billion in March. The so-called real trade deficit is below its $82.5 billion average in the first quarter.

If the trend in the real trade deficit is maintained, trade could contribute to gross domestic product in the second quarter after having a neutral impact in the January-March period.

Strong data ranging from manufacturing to consumer spending and the labor market have led the Federal Reserve Bank of Atlanta to estimate that economic growth in the second quarter will top a 4.0 percent annualized rate. The economy grew at a 2.2 percent pace in the first quarter.

However, the protectionist trade policy being pursued by Trump poses a threat to the otherwise rosy economic outlook. Trump in March announced tariffs for steel and aluminum imports to protect domestic industries from what he says is unfair competition from foreign producers.

Last week, Trump extended the duties to steel and aluminum imports from Canada, Mexico and the European Union. Mexico has retaliated with measures targeting a wide range of U.S. farm and industrial products. Canada has said it would slap tariffs on imports from the United States, including whiskey, orange juice, steel, aluminum and other products.

A trade war is also looming with China. Washington and Beijing have threatened tit-for-tat tariffs on goods worth up to $150 billion each. Trump claims the United States is being taken advantage of by its trading partners, but economists warn that tariffs will hobble the economy, raising prices and destroying jobs for Americans.

Unfortunately, tariffs will do little to shrink the trade deficit, partly because of the dollar’s status as the global reserve currency and the low U.S. savings rate, including a fiscal deficit that has been blown up by a $1.5 trillion tax cut package.

The politically sensitive goods trade deficit with China increased 8.1 percent to $28.0 billion in April. The deficit with Mexico narrowed 29.8 percent to $5.7 billion in April. The United States had a $0.8 billion goods trade deficit with Canada in April.

In April, exports of goods and services rose 0.3 percent to a record $211.2 billion. Exports were supported by a $1.3 billion increase in deliveries of industrial supplies and materials such as fuel oil and petroleum products.

Exports of industrial supplies and materials were the highest on record in April. Soybean exports increased $0.3 billion and corn shipments also rose by a similar amount. But exports of commercial aircraft tumbled $2.8 billion.

Exports to China fell by 17.1 percent in April.

Imports of goods and services slipped 0.2 percent to $257.4 billion in April. Imports of consumer goods dropped $2.8 billion, weighed by a $2.2 billion decline in imports of cellphones and other household goods. Motor vehicle imports fell $1.0 billion.

Crude oil imports rose $1.0 billion in April. Imports from China were unchanged in April.